News Wrap, Week 20

Sometimes it’s easy to forget that Formula One, so tightly wrapped in its own bubble of self-absorbed self-importance, can have genuine influence out there in the ‘real’ world. We get so caught up at analysing aero performance, debating team orders and critiquing Eddie Jordan’s ability to dress himself that we become oblivious to the external forces pushing on – and being pushed by – this enormous, continent-travelling circus of a sport.
Two major events are highlighting Formula One’s place out there in reality. The first of which is the Gribkowsky case and the matter of the missing $44 million. The other, I’m quite delighted to say as a student of journalism, involves the News International phone hacking scandal.

This is a telephone

The phone hacking scandal, it must be said, is currently tearing sections of the UK print industry (as well as parts of Parliament, it must be said) to shreds. Particularly, it revolves around allegations of the illegal hacking of phones belonging to various celebrities, members of the royal family and members of the general public in both Great Britain and overseas by a number of former journalists employed by the now defunct tabloid paper News Of The World. There are also cases of alleged bribery to be answered for, and many suspect a whole host of other criminal matters may come to light with the folding of the historic paper.
The effect of the scandal is being felt right around the world. News Corporation, the US parent company of News International in the UK and chaired by Rupert Murdoch, is currently being investigated by the FBI for any wrongdoing. Meanwhile, politicians in Australia are looking into media and privacy reforms to protect the public here from similar occurrences. We’ve also seen the Australian Government step in to prevent News Limited – also a subsidiary of News Corporation – from winning the rights to operate the Australia Network – Australian television to be broadcast throughout the Asia/Pacific region.
‘Sure,’ you’re thinking. ‘That’s all well and good (and a fascinating case of the intertwining of media and politics), but what the freak does it have to do with Formula One?’ Do read on…

Gribowsky and Ecclestone
Earlier in the year, you may remember news of Crazy Bernie being called to Germany to answer questions for Munich prosecutors over the matter of some $85 million floating freely between both he and one Gerhard Gribowsky, former employee of BayernLB – A German bank.
Prosecutors allege that Ecclestone bribed Gribowsky – who was in charge of selling BayernLB’s controlling stake in Formula One in 2006 –$44 million to undervalue the worth of the sport. It is also alleged that Eccelstone was subsequently payed off to the tune of $41.4 million from the bank, as well as further payments to his family trust Bambino Holdings. Alleged, alleged, alleged.
Gribowsky was charged this week with tax evasion, breach of trust and receiving corrupt payments from Ecclestone, who is now being investigated for his part in the deal.
It remains to be seen whether the prosecutors will be able to pin Ecclestone for anything, but the longer the investigation continues, and the more Ecclestone becomes tied up in Germany, the more uneasy CVC will become with their investment. The prospect of sale will be looking ever more appealing, especially when you consider they have other investments to worry about, other investments that find their parent company’s image important. That image is slowly being smeared by this case of bribery and corruption. But why is this important?

News Corporation and Formula One ownership
Earlier in the year, you may remember ,rumours began to circulate that CVC Capital Partners – currently the majority stakeholder of Formula One – were looking to sell their shares. They have very nearly paid off the debt accrued to buy it in the first place, which means this investment company will inevitably start looking for ways to maximise their return on the purchase. The company highlighted as CVC’s successor? News Corporation.

Ecclestone: not so powerful now, hey?

News Corporation, in fact, leaked the information on its own accord to various respected business media outlets that it, along with a small collection of other interested parties, were looking to buy Formula One from CVC. While Bernie Ecclestone insisted that his sport was not for sale, it was quickly pointed out that Bernie, despite being the face and, for all intents and purposes, the organiser of the sport, in fact owns only around 7 per cent personally. This grows to 14 per cent when you take into account shares held by his various trust companies. His say, in the end, counts for little.
News Corporation (and co) presented themselves as a viable next step for Formula One ownership, though the idea of the sport switching to pay television didn’t appeal to anyone involved with the sport itself. It’s worth noting, though, that News Corporation, despite its significant power within the British pay television service BSkyB, does not control it, so this switch wasn’t guaranteed. Moreover, in the wake of the phone hacking scandal, News Corporation has withdrawn its bid to take control of the broadcaster.
So this is where it all ties together. CVC, who may well look to sell in the short- to mid-term in order to tidy up its name, suddenly have limited options. They can go with News Corporation, though it seems unlikely that they would be in any state to put together a bid. In any case, any potential buyer of Formula One must be approved by the current president of the FIA – and do you think Jean Todt would approve of such a buyout?
The much-hyped alternative, it seems, is the controlling interest in Formula One being bought by FOTA. We learnt earlier in the year that Ferrari, McLaren, Red Bull and Mercedes held talks with each other to explore the possibilities of ownership, though talks have since gone quiet with the rumours of sale. Nevertheless, it’s something to keep an eye on.

New Grands Prix?
During the same week that the Victorian State Government announced that the 2011 Formula One Australian Grand Prix cost it $50 million – up $700,000 on the previous year and up $48.3 million since the first race in 1996 – the possibility of a number of European Grands Prix alternating with each other has popped up.
France has been making some noise lately as to its intention to return to Formula One with a race and, hopefully, a driver. The possibility has been raised that it might share a late August calendar slot with the financially-ailing Belgian Grand Prix. As much as that may irritate many long-term Formula One fans, it’s certainly a better option than seeing Spa disappear completely from a season.
Meanwhile, a second time share option has occurred, this time with the similarly troubled German Grand Prix. Neither Hockenheimring nor Nürburgring have the finances to continue hosting races annually. Red Bull recently re-opened what was formerly that A1 Ring, which was formerly the Österreichring, which is now the Red Bull Ring. A similar alternating deal could be struck between Austria and Germany, were it to mean Germany might still see Formula One every so often. It’s only fair when you consider that approximately 99 per cent of the current Formula One field is Germany.

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